A Transfer Price Is the Price One Subunit Charges for a Product

question 110

True/False

A transfer price is the price one subunit charges for a product or service supplied to another subunit of the same organization.

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Definitions:

Product Costs

Expenses directly associated with the manufacturing of a product, including materials, labor, and overhead.

Conversion Costs

The sum of labor costs and manufacturing overhead costs required to convert raw materials into finished products.

Factory Overhead

Indirect manufacturing costs that cannot be directly attributed to specific units produced, such as maintenance, utilities, and salaried personnel expenses.

Direct Labor

The expenditure on the pay of staff who are directly participating in the creation of products or services.